August 2, 2011

Gilt, please don’t jilt the wine industry . . .

Flash sale sites serve various purposes.  We at VinTank have mixed feelings about these entities (good infographic – I recommend clicking on this link) with more love for some than others.  Gilt is one of those groups that we appreciate due to their demographics and their attempt (with Lot18 and others) to drive forward the “marketing agent model.”  It is the avante-garde of models moving the wine industry into more advanced ways of marketing wine.  We have also been pleased to see Gilt focus more attention on the “gourmand” with its launch of GiltTaste – a place they are looking to bring great Epicurean selections to the masses (including wine).  There has also been rumors that they are trying to sell products at full price!  A marketing agent site that is focused on full price instead of aggressive discounting?  Hallelujah.  But our hopes of their love for the wine industry were shattered when we got to see an early version of their Gilt Contract.  Here is the language that troubles us most:

“Seller agrees that for the Term of this Agreement, and for twelve (12) months following the Term, it will not enter into any similar agreement with a Direct Competitor or create its own flash sale site for the marketing of wine. “Direct Competitor” means a company similarly situated to Agent that is in the business of conducting online marketing via a flash sale model, including, but not limited to, Rue La La, One Kings Lane, HauteLook, Lot18, inVino and ideeli. In addition to the termination rights contained in Section 11, Agent shall have the right to terminate this Agreement immediately if Seller breaches this Section 8. Upon such termination, Agent shall have no obligation to feature a previously agreed upon Marketing Event on the Gilt Groupe Website.”

While we understand protecting their interests, what troubles us most about this contract is two-fold:

1. As a marketing agent there is no guarantee there will be significant sales (or any).  In essence they are binding the hands of the winery signing this contract with no promise of meaningful results.  What if they sold nothing or very little?  That winery would be locked out of the market for a year to help them find financial stability. The risk outweighs the reward.

2. The marketing agent model is already threatened by ABC officials and wholesaler opposition.  However, in our humble opinion it is the most needed model in the wine industry.  However, when terms of “exclusivity” show up in contracts those border on violating decades of regulations and would be clear violations for retailers (tied house laws).  By moving more and more to the fringe, they give unnecessary potential ammunition to the opponents of the model.  To get marketing agent live and fully operational these companies leveraging the model need to still operate within some basic parameters that mirror some of the more institutionalized wine business traditions.  After demonstrating a healthy and legitimate channel that does not violate wine marketing rules, only then can we begin to challenge some of the draconian business practices.  By pushing the envelope too early they jeopardize the channel for the entire industry.

So Gilt and other marketing agents, we ask you, please don’t jilt the wine industry with language like this.  Instead build a model that will revolutionize the way wine is marketed online and benefit your focus on our industry.  You will win, wineries will win, and consumers will win.


  • Rich Reader

    I pledge not to do business with any site that attempts to limit the channels that should be open to wineries to sell their goods.  It’s making a difficult situation that much more of a hardship for the producers to survive.  Do you agree?

  • David White

    Paul – 100% agree that “The marketing agent model… is the most needed model in the wine industry.” I think it could eventually tear down the three tier system. Any active, public wholesaler opposition to the marketing agent model that you know of?

  • Anonymous

    I agree Rich.

  • Anonymous

    David, they do it behind the scenes and not publicly.  I think there were some statements from WSWA somewhere . . . looking.  Hope you are well my friend.

  • El Jefe

    When doing a flash sale, a level of exclusivity is in everyone’s best interest – it allows the sale to run its course and not be tainted. But I don’t think you can call a one year sale a “flash” sale by any stretch…

  • Dane

    I myself ran a flash sales site, and as far as contracts go, this is standard in every single company out there from Lot18 to Groupon. Absolutely no one follows up with it, but I think it’s there as a back up in case they decide you have hurt them in some way. I think it’s mainly focused at larger corporations like The Gap who may achive great success with one flash sale site then choose to do it again. But to monitor the thousands of deals going on a day and making sure they don’t do one months later is impossible for these companies.

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